Trade surges on Arctic's Northern Sea Route

Melting ice brings continents closer

KIRKENES, NORWAY – The town of Kirkenes in the northernmost portion of Norway used to be further away from Asia than virtually any other European port, but it suddenly seems a lot closer. The reason: global warming.

Melting ice has opened up the Northern Sea Route along Russia’s Arctic coastline, changing international trade patterns in profound ways — even if it still looks more like a sleepy county road than a busy, four-lane highway.

In a change of potentially revolutionary significance, the travel time between Yokohama and the German port of Hamburg has been cut by 40 percent, while fuel expenditures are down 20 percent.

“For the first time in history, we are witnessing a new ocean opening up in the high north that will have a major impact on both trade and provision of energy,” said Sturla Henriksen, the president of the Norwegian Shipowners’ Association.

In 2012, when the ice reached its lowest amount on record — 3.4 million sq. km — 46 ships used the new route, compared with only four in 2010, according to Rosatomflot, a Russian operator of icebreaker ships.

The traffic is still negligible compared with traditional routes. Ships transit the Panama Canal 15,000 times a year, and a further 19,000 pass through the Suez Canal. However, the future looks promising.

The volume of goods that is transported along the Northern Sea Route is likely to see strong growth in the coming years, from 1.2 million tons last year to 50 million tons in 2020, the Norwegian Shipowners’ Association says.

Kirkenes, whose 3,400 inhabitants live in nearly uninterrupted darkness during the winter months, is suddenly frantically preparing for the expected boom.

The Tschudi Shipping Group plans to open a logistics hub measuring the equivalent of 200 soccer pitches in a nearby fjord that is left ice-free all year by the warm Gulf Stream.

The port’s location is extremely strategic.

It is nine days’ travel from both the Pacific and the Mediterranean, and close to major oil and gas deposits in the Arctic as well as mines in northern Sweden and Finland.

Twenty-six of the ships that traversed the Arctic Ocean between Europe and Asia last year were carrying hydrocarbons, while six were transporting iron ore or coal.

The new route also opens up an interesting market for liquefied natural gas (LNG) extracted in the Barents Sea, especially after North America, the customer that local firms initially had in mind, has turned away following a decision to use its own shale gas.

On the other hand, Asia’s appetite for gas has increased after the 2011 Fukushima nuclear disaster, and prices in Japan are significantly higher than in Europe.

Adding to the lucrative nature of the trade, each ship transporting LNG by the northern route can do it close to $7 million cheaper than vessels going through the Suez.

Traditional goods traffic, however, is not realistic in these latitudes, according to Tschudi Shipping.

“The big trading routes in dry bulk shipping are located too far south for the Northern Sea Route to become relevant,” said Henrik Falck, the company’s project manager for Eastern Europe.

And “we can forget about containers,” he added, noting that owners prefer traditional routes with stops at densely populated cities along the way.

In a fragile ecosystem that is the source of immense worry among environmentalists worldwide, Russia plays a central role in assisting navigation with icebreakers.

It has also decided to establish 10 bases along its coast to redress the current abject lack of infrastructure.

Admitted last month as an observer in the Arctic Council, China also wants in on the action.

After the first transit of its Snow Dragon icebreaker last year, the world’s second-largest economy now plans to send its first commercial shipment along the northern route this summer.

Between 5 and 15 percent of Chinese international trade could take this new route by 2020, the director of the Polar Research Institute of China, Yang Huigeng, was quoted as saying in media reports.